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Montana RRG CareConcepts Is in Liquidation

Montana Flag
November 08, 2016

On May 23, 2016, the Office of the Montana State Auditor, Commissioner of Securities and Insurance (CSI), suspended the license of CareConcepts Insurance, Inc., a risk retention group (RRG), allowing the Insurance Department to take control and supervise CareConcepts. On August 8, 2016, the Montana CSI issued a court order, signed by a Montana District Court Judge, to commence liquidation of CareConcepts. On August 10, 2016, CareConcepts was placed into liquidation. Michael J. FitzGibbons, president of FitzGibbons and Company, Inc., was appointed as special deputy liquidator on August 22. Claims against CareConcepts have a deadline of March 31, 2017.

In 2013, CareConcepts, formerly known as CareNext RRG, was domiciled in the state of Montana. This niche RRG provided general and professional liability insurance and risk management to senior living/nursing home facilities. Their policies were offered on a claims-made basis. CareConcepts had about four members and generated approximately $1.5 million in premiums. According to Demotech, Inc.'s, Analysis of Risk Retention Groups—Year-End 2015, a summary of their assets and liabilities for the past 3 years showed the following.

Year Assets Liability
2013 $2,092,000 $1,281,000
2014 $3,364,000 $2,386,000
2015 $3,322,000 $2,667,000

Although CareConcepts had about $600,000 in surplus at the end of 2015, the assumption is that they had been significantly under-reserving and fell below the minimum due to an adverse loss development. According to court records, this RRG is in liquidation because, as of March 2016, CareConcepts had not maintained a minimum of $500,000 in paid-in-capital and surplus.

According to Dan Labrie, chairman of the National Risk Retention Association (NRRA) and former CEO of Housing Authority Insurance Group (HAIG), due to current soft market conditions, small RRGs are faced with challenging times. Soft market conditions create two problems: one, lack of sufficient growth to generate adequate spread of risk, and two, an inability to raise premium rates to cover the increase in claim costs and higher expenses.

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